Does VMware's New Pricing Make Virtualization More Expensive?

By Sean Michael Kerner (Send Email)
Posted Jul 15, 2011


This week, virtualization leader VMware launched its vSphere 5 release, expanding the power and capabilities of the virtualization platform. Alongside that release came news of a pricing change for VMware that rivals argue could mean a significant increase in costs. Red Hat accuses VMware of raising prices on virtualization, VMware disagrees.

VMware's new pricing requires customers to consider and understand how much virtual memory or vRAM is associated with a deployment.

"First, we want to clarify that VMware vSphere 5 will still be licensed per CPU (processor); the change is to the entitlements associated with that CPU license," Tim Stephan, sr. director, product marketing, VMware, told InternetNews.com. "We are replacing the vSphere 4.x entitlements of CPU cores and physical RAM with a single, virtualization-based entitlement of pooled virtual memory, or vRAM."

That move could end up costing users a lot of money, according to Scott Crenshaw, VP of the Cloud Business Unit at Red Hat. Crenshaw told InternetNews.com that the licensing change penalizes large deployments that rely on lots of RAM. He noted that the big opportunity now is big data, so you need a great deal of memory.

"It looks like VMware has done the impossible and made virtualization more expensive, and they've eliminated the benefits of server consolidation," Crenshaw said.

In Crenshaw's calculations, the new pricing model could penalize some users with an increase of up to 300 percent. VMware (NYSE: VMW) disagrees.

"We are confident that as we move into the cloud computing era, our vSphere 5 vRAM licensing model will allow our customers and partners to best take advantage of the benefits and flexibility of cloud computing by allowing the pooling of licenses," Stephan said.

In Stephan's view, the change in licensing won't affect most customer deployments today.

"From a cost perspective, research we conducted on our customer base earlier this year indicates that, running on current hardware, more than 95 percent will experience no change in licensing costs with the new model," Stephan said. "At the same time, we believe that 100 percent of our customers will benefit from the increased flexibility this model offers."

From VMware's perspective, the cloud represents a new approach to infrastructure -- one that pools resources into a seemingly homogeneous pool of capacity.

"As our customers virtualize more of their environments and create larger pools, the current model of licensing based on the physical attributes of each individual server has become restrictive, and limits the flexibility of managing and upgrading the server pool," Stephan said. " VMware has been working with both customers and cloud service providers to come up with a more cloud-friendly licensing model, one that will break free of physical limitations."

In contrast, Red Hat (NYSE: RHT) is staying with a per-socket model for its technologies. Crenshaw noted that Red Hat had at one point based pricing on a per core model, but that proved impractical as a way for customers to plan their budgets and requirements.

From Crenshaw's perspective, the VMware pricing model changes represent a real opportunity for Red Hat, as they provide a contrast between the two companies.

"Red Hat is open and VMware is locking you down, and when they get you hooked they extort you with price changes," Crenshaw said. "What VMware means by open is they want customers to open their wallets."

Sean Michael Kerner is a senior editor at InternetNews.com, the news service of Internet.com, the network for technology professionals.

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